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Australia has upped its humanitarian program, increasing the number of refugees by 6000 annually to just under 19,000, effective 2018. Announcing this at President Barack Obama’s invitation-only summit on refugees in New York, prime minister Malcolm Turnbull also revealed Australia will take refugees from Central America as part of a US-led program. Australia is also spending $350 million towards helping refugee efforts in Middle East countries close to Syria and Iraq.

This latest move comes at a point when Australia is seeking a deal with the US, Canada, New Zealand and other Western nations to provide a home for refugees currently stranded at offshore centres on Manus Island, Papua New Guinea and Nauru. Under Australia’s tough border protection policy asylum seekers that seek to reach Australia by boat are taken to one of these processing centres for assessment on the basis that even if they are judged to be refugees they will not be settled in Australia. The policy has stopped the people smuggling trade, with no boat arrivals or deaths at sea for more than two years.

Australians have always welcomed immigrants, and is a multicultural country, but an opinion poll published today has 49 per cent of Australians opposing Muslim immigration. This is partly because the security services have identified 500 potential Islamic terrorists in the country, but more likely because of opposition to those elements seeking to impose Sharia law within their communities.

Just weeks after the Turnbull government blocked, ‘for strategic reasons’, the Chinese from taking a controlling interest in the New South Wales power grid, China has been given the nod to take a 20 per cent stake in the strategically significant Port of Melbourne, the country’s largest.

The Port of Melbourne has been privatised by Victoria’s Labor state government for an unexpectedly high figure of $9.7 billion, in what is the most significant Australian infrastructure deal for two decades. The winning Lonsdale Consortium consists of four pension funds, with the Australian government’s own Future Fund, chaired by former federal Liberal treasurer Peter Costello, taking the lead.

Missing out with a slightly lower bid was a consortium led by IF-M Investors and Macquarie Infrastructure. However, Australian Strategies understands that the final decision was made on the strength of Future Fund and Chinese government support, a detailed 50-year business plan and a commitment to invest immediately an extra $5 billion to expand and develop the port, which will transform the Port of Melbourne’s prospects and make it a strong competitor to Port Botany in Sydney. The State of Victoria has achieved double the sale price that NSW achieved for Port Botany, but Melbourne is about double the size, occupying 575 hectares compared with Port Botany’s 270 hectares.

The outcome is a win for Victoria’s Labor premier Daniel Andrews, whose unpopularity over a couple of issues cost federal Labor key seats that might have won it the recent election. Although the privatisation is a state matter, it is also a win for the Turnbull government whose decision to block the lease of NSW electricity distribution business upset Beijing and left questions over future Chinese investment in Australia.

So far, September has been a surprisingly and unexpectedly good month for Turnbull. First, falling unemployment and a higher than expected growth rate in the first quarter of 3.5 per cent has lifted confidence. More significantly, the Government and Opposition reached a compromise on $6.5 billion of cuts to the federal Budget that had previously been blocked, and a compromise on reductions in superannuation tax concessions is also imminent. On both issues, the Canberra press corps were taken by surprise, partly because they believe Opposition leader Bill Shorten would not fulfil an earlier promise to cooperate in the national interest, as reported by Australian Strategies in July.

Friends of former prime minister Tony Abbott have been loudly canvassing a swift demise for Turnbull, and replacement by his predecessor, but this is improbable. The loss of Australia’s triple A rating, once looking probable, now seems less likely in the light of a growth rate higher than any G-7 nation, improving relations with Indonesia, and a huge infrastructure deal, courtesy of a state Labor government.

The Coalition is not without its problems, however. It seems likely to lose the upcoming Western Australia state election. Turnbull lacks the punch and drive of New Zealand’s John Key, on whom he once pledged to model himself, and his treasurer isn’t as good as NZ’s Bill English. But marked as a D a month ago by Australian Financial Review readers, he probably now deserves a C+ or B-.

One week after a three month break — the longest anyone can remember — Australia’s federal politicians took another week off and left Canberra with plenty of vacant hotel rooms and another policy vacuum.

Senior ministers were scattered around the world. Prime minister Malcolm Turnbull had a full agenda, attending first the G-20 leaders’ meeting in Hangzhou, China, then flying to Laos for the East Asia Forum and an ASEAN summit, and finally a meeting of the Pacific Islands Forum in the Marshall Islands.

Trade minister Steven Ciobo went to Brussels to seek traction on the Australia-European Union free trade agreement negotiations. He went on to London to open talks with UK trade minister Liam Fox, picking up the threads of Turnbull’s earlier meeting with British prime minister Theresa May. Both Australia and Britain are keen to conclude an FTA, and while negotiations cannot formally begin until Britain is out of the EU (at least two and half years away) the two countries have set up a working party to agree a road map and identify differences.

The British market offers attractive opportunities to Australia’s food and wine sectors, especially if London imposes quotas on European produce, as it may if no agreement with the EU is forthcoming.

Malcolm Turnbull

Turnbull has ended his first year on a high note despite his overall dismal performance as PM. His dealings with Asian leaders in the past week have been faultless, as even his detractors acknowledge. He was firm, calm and composed with the Chinese leadership, making clear Australia expected China to respect the rule of law in the South China Sea, and its strategic decisions on Chinese investment in Australia. At the same time, he called for disputes to be settled peacefully and offered to host an ASEAN Plus meeting in Australia to help this process. He welcomed progress between China and ASEAN on the latter’s proposal for a code of conduct on the South China Sea. He invited the leaders of Indonesia and Malaysia to visit Australia, and appears to have developed a warm relationship with Joko Widodo, a prospect that seemed impossible 18 months ago. Turnbull also gave strong support to Xi Jinping, Theresa May, Barack Obama and ASEAN on the need for free trade as a major driver of growth at a time of rising protectionism.

By contrast, Opposition leader Bill Shorten had a wretched week, mired by his own unwillingness to sack from his front bench the ambitious senator Sam Dastyari.

Dastyari had earlier admitted to asking a Chinese donor to pay a $1600 travel overspend, as well as $5000 in legal expenses. At a subsequent news conference, contrary to his party’s and government policy, he said that Australia should adopt a neutral stance on China’s military expansion in the South China Sea. After refusing to take action, Shorten back-flipped and accepted Dastyari’s resignation. It was not a good look.

Parliament returns on Monday (Sep 12) to business as usual. Labor will pursue its demand for a royal commission into the banks, and we can expect more bickering over how to reduce the budget deficit. Turnbull’s troubles are not over, as Abbott seeks a return to the top job, unlikely though that sounds. News Corp columnist Andrew Bolt, a friend of Abbott, has been using his air time on Sky News to canvas this possibility, and to rubbish Turnbull.

Glenn Stevens, the outgoing governor of the Reserve Bank of Australia had more important things to say. In a valedictory interview with the Australian Financial Review, he said that 25 years of uninterrupted economic growth had led the public into complacency, with voters and politicians sharing the deluded view that this is the norm and growth will continue without any change in policy settings. “It’s not a game. It’s not a sporting event we like to spectate on. It’s real”, he said.

It has been a dismal week in Australia. After a near four-month break Parliament is back in a miasma of self indulgence, with the Government undisciplined and indecisive, and the Opposition playing cheap tricks to score points of no value. Neither leader shows himself fit to govern. Meanwhile the economy is starting to deteriorate, after a dismal results season, falling economic growth and investment, confusion over policy, and a jaded public seduced by populism. Dr Ken Henry, former Treasury secretary, and now chairman of the National Australia Bank, has seen two of the key strategic reports he chaired – one on taxation, the other on Australia in Asia – consigned to the archives in Canberra, a capital that has lost its way. Now read on:

Reporter: Colin Chapman

Dr Ken Henry

“Do we understand the reasons for past success? Do we have any memory of the policy effort that was required to build an economy capable of generating 25 years of unbroken growth? Have weretained the capability to identify national challenges and opportunities, and to develop strategies tomake the most of them? Do we even care?”

These were rhetorical questions posed by National Bank chairman and former Treasury secretary Ken Henry as he lit a torch under the prospects for Australia and the investment community in an all-encompassing presentation to the Australian Institute of International Affairs on September 1.

You know his answer already, of course.

“If we were to judge by the quality of what we tolerate in policy debate in Australia today, we would

have to answer these questions in the negative.”, Dr Henry said.

He was was particularly critical of Canberra politicians, who he suggested were failing to face up to the realities of the need for economic and tax reform, pandering instead to populism. He continued:

“The recent global financial crisis should have served as a national wake‐up call, but instead it appearsto have encouraged an attitude of Australian invincibility. It should have reminded all Australians ofthe fragility of our financial linkages to the rest of the world – linkages that have been critical to Australian prosperity.

“We take these linkages for granted, even as we observe continuing financial fragility and growing

protectionist sentiment almost everywhere we look.”

The NAB chairman set out bluntly three mistakes the politicians – and us all – have made.

“First, an inability to repair the fiscal position of the Commonwealth, putting at risk the AAA credit

rating that underwrote much of what we were able to do in 2008 to protect the Australian economy.

Second, an increasingly fearful attitude to various foreign investment proposals, which is putting at

risk our ability to join regional partnerships.

“And third, a populist infatuation with the profitability of the larger domestic banks, putting at risk

the robustness of the very institutions we rely on to provide dependable channels to global debt

markets – funding that provides reliable financial support for home owners, investors and

businesses.”

Dr Henry said a country “bogged down by these economic quagmires” could not possibly have a sufficient understanding of the reasons for past success, or capable of developing the right strategies that would make the most of present challenges and opportunities. “We are not invincible”, he said. “To the contrary our economic prosperity is at greater risk than at any time in my working life.”

The former Treasury secretary, and the major figure in the ‘Australia in the Asian Century white paper, told a packed audience that as political debate had decayed to populism, most Australians would believe they have been treated cynically.

So what is the solution to Australia’s problems? While acknowledging that globalization had not benefitted everybody, Dr Henry firmly rejected the kind of protectionist policies now being advocated by Nick Xenophon and a number of other groups.

“We are some distance from the place we need to be.”, he said. “In

that place, political activity would be predictable, with policy based on sound theory and robust

evidence. It would, therefore, be a place in which government policy avoided short‐termism and

had no taste for protecting vested interest; a place in which government had the intellectual

capacity and political courage to articulate a compelling vision of what could be, the challenges and

opportunities confronting us, the strategies that would best meet those challenges and

opportunities, and the investments in capabilities, systems and processes required to ensure

successful implementation of those strategies…… What we need is political leadership capable of

constructing a compelling narrative that contains a realistic assessment of present circumstances,

articulates an attractive vision of what could be, and explains the strategies that will best secure that

vision.

Australia has no such narrative today.”

As principal author of the Asian Century white paper, inevitably Dr Henry believes that narrative should encompass the opportunities offered across Asia, where growth has been staggering and now represents 40 per cent of world economic activity. “By the end of the first decade of the 21st Century, there already 500 million middle class people across Asia. By the end of this decade, that’s expected to rise to 1.7 billion people, and by the end of the next to more than 3 billion.”

Asked by Geoff Miller, former ambassador to Japan, whether Australia had “missed the boat” in Asia, Dr Henry replied that several boats had been missed, but there were still big opportunies so long as the country developed Asian relevant capabilities, shorthand for the “skills Australians need now, including knowledge of language, culture and business practice”. And more, not less, Chinese investment that only accounted for less than 2.5 per cent of the whole, compared with the US and UK, hich, together, account for nearly half.

“it is not reasonable to expect that Australian businesses will capture new Chinese markets

without being supported by the personal relationships, commercial links, and especially the funding,

that Chinese investment in Australia can provide, Dr Henry said.

“I think we may have missed some boats”, he said, “but not the boat. Many opportunities are still there, especially when we concentrate on high quality Products. That is what the agricultural sector has done. Those that have been successful have gone to the trouble of spending time in China and building trust and good relationships with their customers”

The NAB chairman said that the key to building successful relations in Asia was through though equipping individuals as well as institutions with knowledge and language skills. “Do we in Australia place sufficiently value in Asian capability”, he asked, rhetorically. ”I don’t think so.”

How Labor’s House tactics made history.

The Australian Labor Party’s self-righteous ‘attack dog, Senator Sam Dastyari, has embarrassed Opposition leader Bill Shorten by admitting that he asked a Chinese state company to pay a $1600 travel bill while also making comments on the South China Sea dispute that conflict with both Government and Opposition policy. Dastyari said Australia should stop challenging China’s claims.

This has earned him the nomenclature of ‘China’s Poster Kid” in the Australian Financial Review, which reported the Communist Party’s newspaper, Peoples Daily, had listed Dastyari as one of China’s key supporters after a landmark ruling repudiating Beijing’s claim over most of the South China Sea. Dastyari was the only Australian in the list, which included politicians from Russia. Ecuador, Columbia and Nepal.

Bastyari, a rising star in the Labor party and recently promoted to the front bench, which spent the first three days leading his party in disruptive tactics designed to frustrate a government with a majority of only one. In this Shorten has broken a promise he made, reported in Australian Strategies, to cooperate with the government in measures to reduce the deficit.

A former Labor prime minister has been in better form. Paul Keating, in conversation with Professor Bob Carr of the Australia-China Relations, suggested a better way of dealing with Australia’s role in US-Chinese rivalry over the South China Sea, Keating proposed what he termed “elastic diplomacy”. “Australia has to respond with a nuanced insight into its real place in the world”, he said.

And the problem? Keating replied, “While China sees the development of a multi-polar world, the United States, with its mission to propagate Jefferson values, is not psychologically equipped to handle the takeover of China as the world’s leading power, as Happened between Britain and the US in the 19th Century”.